08 February 2018

What Will 2018 Bring to the Ship Recycling Industry?

One year ago I contributed an article to The Maritime Executive anticipating that 2017 would bring two important developments to the ship recycling industry. In the first place I anticipated a major breakthrough towards the entry into force of the Hong Kong Convention through the promised accessions by Denmark and India, and secondly I had expected that the European Commission would announce a list of non-E.U. yards approved for the recycling of E.U. flagged ships.

Denmark did accede to the Convention in 2017, opening the way to any other skeptical E.U. Member States, by highlighting a final break away from Basel Convention as the preferred international convention for regulating ship recycling by the Danish Ministry of Environment. I think that in 2018 we will start seeing a growing number of countries acceding to the Convention and if I had to guess, I would say that Germany, the Netherlands, possibly Italy, Estonia, and, from Asia, Japan may accede to the Convention in 2018.

Whilst India did not accede to Hong Kong Convention in 2017, it nevertheless issued in December a pre-legislative consultation on its draft Safe and Environmentally Sound Recycling of Ships Bill, 2017, giving effect to the provisions of the Hong Kong Convention. Separately, the Indian Ministry of Shipping announced that all ship recycling facilities that wish to continue operating beyond July 2018 will have to upgrade their infrastructure through the provision of impermeable floor for the secondary cutting.

In the meantime, by the end of 2017 half of all recycling yards in Alang have invested in infrastructural and procedural improvements and have obtained a “Hong-Kong Convention Statement of Compliance” from IACS classification societies. These initiatives by the government and by the industry manifest the transformation that has taken place over the last four to five years in India.

Whereas the eventual entry into force of Hong Kong Convention will ensure that the transformation of India’s yards can remain commercially sustainable in the long term, in the present time the motivation towards (or the discouragement away from) higher standards will be driven by developments in the European Union.

The European Regulation on Ship Recycling was adopted and entered into force at the end of 2013. The Regulation did not require that its provisions would come into effect immediately, but instead it specified a schedule of application, whereby the first version of the European List of approved yards would be published not later than December 31, 2016, whilst E.U. flagged ships would have to: have an Inventory of Hazardous Materials; be surveyed; be certificated; and be recycled in accordance with the new Regulation, from the earlier of the following two dates: (a) six months after the European List of approved yards reaches a combined capacity of 2.5 million LDT; or (b) the end of December 2018.

According to the Regulation, yards located outside the European Union have to apply to the European Commission for an assessment on whether they fulfill the requirements of the Regulation, while yards located in a European Member State are nominated by the Member State for direct inclusion in the European List of approved yards.

After spending an inordinate time developing non-binding and incidentally not particularly helpful guidance for non-E.U. applicant yards, the European Commission invited non-E.U. yards to apply for inclusion in the European List in the middle of 2016. Applications were received from the U.S. (two yards of 72,868 LDT), China (four yards of 1,767,215 LDT), Turkey (seven yards of 450,903 LDT) and India (five yards of 323,497 LDT) of a combined maximum annual capacity of 2.6 million LDT. Further applications can be made at any time.

By the end of 2016 no yards outside the E.U. had been approved, so the Commission fulfilled its obligation to publish the first version of the European List by listing 18 yards located in 10 E.U. Member States with a combined maximum annual recycling capacity of 303,065 LDT. As the definition of capacity is based on the maximum LDT that has been recycled by a yard in any one year during the last 10 years, this does not provide any assurance that all the listed yards are currently operational and with full capacity.

Furthermore, looking at the list of the 18 European yards it is difficult to locate yards known for the recycling of ocean-going vessels. Instead it should be assumed that most of the European yards specialize in the recycling of small boats, domestic shipping and inland waterways shipping, all of these being outside the scope of the Regulation (and of the Hong Kong Convention).

As we arrived at the end of 2017 there was still no news from the European Commission on when the first batch of non-E.U. yards would be approved. To have taken a year and a half to consider 18 applications is extraordinary to say the least, especially when considering the abundant availability of budgets for the consultants who do the actual work leading to the assessment. I can only guess that what prevents the finalization of the assessment are the politics that are being played in Brussels over the issue of beaching.

The European Parliament, the Green Party, the NGO Platform, and at times the European Commission, have all opposed the use of even the best beaching yards for the recycling of E.U. flagged ships, regardless of the dire consequences such an exclusion would have. Interestingly, the data quoted above on the applicant yards shows that the European Commission does not have to rely on any beaching yards in South Asia to reach its capacity target. Approval of the four Chinese (1,767,215 LDT) and seven Turkish applicant yards (450,903 LDT), together with the already approved European yards (303,065 LDT) brings the total capacity to just over 2.5 million LDT.

So the question is what is keeping the Commission from completing this much overdue work of assessing the yards and publishing the list?

Could it be that some practical questions and a dose of realism have finally started troubling the officials, who are realizing that this is not a numbers’ game and that the recycling capacity in the European List ought to be made up of yards that are operational and also keen to compete buying ships for recycling?

Could it be that the Commission has suddenly come across the statistical tables published by the World Steel Association and seen how China has increased its steel production using Oxygen Blown Converters and iron ore, and reduced the use of the Electric Arc Furnace and the reliance on ferrous scrap (EAF from being 15.3 percent of the total Chinese production in 2004, has dropped down to 5.2 percent in 2016)?

Or how China’s imports of ferrous scrap have been reducing (from a record 13.7 million tons in 2009 down to 2.2 million in 2016)?

Or how China’s ship recycling industry has declined from being the leading ship recycling country in 2009 with 31 percent share of the world market, to fourth position in 2016 with a market share of 12 percent (and which is expected to further decline when the subsidy paid by the government for the recycling of Chinese ships is terminated in 2018)?

Quoting from the GMS weekly market report of December 22, 2017: “A silent end to the year in the Chinese ship recycling industry brings with it, perhaps a new dawn where facilities are closed and even government owned Chinese flagged vessels head to sub-continent shores, as state subsidies come to an end next year. One or two of the major / larger facilities (in Xinhui and Shanghai region) will most likely remain open and retain their licenses. However, their price offerings are not likely to be competitive with the Indian sub-continent or even Turkey, as has evidently been the case for a majority of this year.”

Also, quoting from the GMS weekly market report of December 29, 2017: “In the build up to Chinese New Year in February, the outlook for the Chinese ship recycling industry has presently been the bleakest it has been for some time now. Not only are levels positioned at over half of where the sub-continent markets are, but they are also lower than Turkey’s at present.”

Note on December 29, 2017 bulk carrier prices per LDT were as following: India $430; Turkey $285; China $210.

It is common sense that for the Regulation to have a degree of success in its enforcement to European flagged ships it will need a list of approved yards that are competitive and geographically spread. If on the other hand the European List is to be made up of: yards in China that are unwilling to buy ships; yards in Turkey that would quickly reach full capacity; and yards of academic value in Europe that will never recycle a large ocean going ship, then it is pretty certain that the Regulation will lead to reflagging and evasion.

Hopefully these thoughts are keeping the relevant officials in the European Commission awake at night in early 2018.

Source: maritime-executive. 07 January 2018

11 January 2018

Scrapyard or museum? After 10 years, still no firm plans for former Mayport carrier USS JFK

It’s been 10 years since the Navy decommissioned the USS John F. Kennedy and left Mayport Naval Station without an aircraft carrier for the first time in years.

Now it looks like it’s facing the same fate as the Kennedy’s predecessor, the USS Saratoga, headed for a scrapyard instead of being turned into a museum to preserve its historical significance.

The Navy recently removed the Kennedy from the list of ships earmarked for donation despite efforts in New England to display the vessel permanently.

But the same group that tried to turn the Saratoga into a museum is still making a push to change the Navy’s mind, and another group is ready to jump in if they don’t’ succeed.

“It’s not unusual for ships to move in and out of donation status as long as there is a viable option in place,” said Frank Lennon, president of the USS John F. Kennedy Project in Rhode Island. “Dismantling and scrapping a ship is a very involved process.”

He said usually when one door closes, another opens. But because the Kennedy is the last conventionally powered aircraft carrier available, there won’t be anymore opportunities for a carrier museum if the Navy decides to go through with dismantlement.

Every operational carrier in the fleet is now nuclear powered, which means they will have to be gutted once they are decommissioned to remove the nuclear reactors. Once that happens there’s no chance of salvaging the vessel to be used as a museum, Lennon said.

Lennon spearheaded the effort to turn the Saratoga into a museum in Rhode Island for about 12 years before that door closed, so then he pivoted his efforts to the Kennedy.

“In 2010 the Navy decided to scrap the Saratoga due to the deterioration of the ship,” Lennon said. “They decided it was not feasible to operate as a public attraction.”

Lennon said the Kennedy has a long way to go before it looks like the Saratoga did when that decision was made.

The Navy decommissioned the Kennedy at Mayport in March 2007, and later that year it was moved to Philadelphia where it’s been ever since.

Former Navy Secretary Donald C. Winter advised the congressional defense committee chairmen in 2008 of his decision to make the Kennedy available for donation, said Colleen O’Rourke, a spokeswoman for Naval Sea Systems Command.

But she said this year that changed.

“The ship was maintained in that status until 2017 when the chief of naval operations notified the secretary of the Navy that CV 67 [USS John F. Kennedy] was being re-designated from donation to dismantlement due to the lack of a viable donation application,” O’Rourke said.

She would not comment on what would have to happen to bring the ship back into donation status and declined to say how long it would take to move forward with dismantlement.

But Lennon’s group isn’t the only contingent interested in preserving the Kennedy.

“They’ve got a lot of power, a lot of good will and a lot of direction, but they lack a site,” said Richard Fitzgerald. “They just don’t have a place to put the JFK.”

Fitzgerald is the leader of a group in Maine that would like to turn the Kennedy into a museum in Portland Harbor. He said it’s a relevant location because it’s the only place the carrier visited on two separate occasions — in 1987 and 1989 — and it played a significant role in World War II when hundreds of ships spent time in the harbor.

Both the Maine and Rhode Island groups made their cases for the Kennedy when it was originally offered as a possible museum, Fitzgerald said, but the Rhode Island group had a much bigger head start because members had worked so hard pursuing the Saratoga.

“We could see the writing on the wall that we were stuck without being able to do what we wanted to do,” Fitzgerald said.

So they agreed to yield to the Rhode Island group to give them a chance to finish what they started.

“They had the lead,” Fitzgerald said. “They had been working on it for 12 years, but when it’s our turn we will be able to take it over.”

Bob Haner is the head of the Kennedy’s crew association, and he’s worked with both Lennon and Fitzgerald over the years.

Both groups have backing from their local governments, but they said the ship’s former commanding officers have a lot more pull with the Navy.

“The bottom line with us in the crew association is we want to save our ship,” Haner said. “Whether it’s in Rhode Island or in Portland, Maine, we just want to save the ship no matter where it’s at.”

He said his concern is that the Navy made an agreement in 2011 when Maine backed out that if the Rhode Island group could not come up with a viable plan, the Navy would reopen the bidding process.

“We just have to see if the Navy is willing to live up to that commitment,” Haner said.

He said if the Navy opens the sweepstakes back up again, any city is welcome to make a presentation — including Jacksonville, where the destroyer USS Adams is set to arrive next year for a museum.

The difference in size between the Adams and Kennedy means it would take a lot more money and a lot more space to bring the larger ship to Jacksonville, Haner said, but anything is possible given the right financial backing.

“Saving a ship is a hard process, it costs a lot of money and you really need a lot of big money people to get anything done,” Haner said.

He said he’s gotten a lot of calls from former crew members since the Navy changed the ship’s designation asking what they can do to stop the dismantlement process. Haner said his message to crew members is to be patient.

The holiday season is a tough time to get answers from Navy officials, he said, so he’s waiting to hear more about the ship’s status before he can advise crew members further.

“I’ve had a lot of my JFK sailors asking me if they should write their congressmen, but I’ve been telling them let’s see where the Navy stands before we do anything,” Haner said.

Lennon said he won’t stop fighting to turn the ship into a museum until the day it is towed to the scrapyard.

He said he isn’t backing away from the fact that his group is struggling to find a berthing location in Rhode Island that will be able to accommodate a carrier museum. Without getting into specifics, he said there are serious negotiations to pin down a place place to dock the ship.

Once that deal is done, he said, the Navy will have no choice but to move the ship back into donation status. But it will take anywhere from $20 million to $60 million to complete the project no matter where it goes.

Haner and Fitzgerald agreed that the Navy is still a long way away from actually scrapping the ship, and they will both step in long before that happens.

“The fat lady hasn’t sung,” Haner said. “She’s not even in the building warming up yet.”

But for now the Kennedy is in Philadelphia, and it’s not among the ships the Navy is looking to donate.

Displacement: 60,728 tons
Length: 1,052 feet overall, 990 feet at waterline
Beam: 252 feet, 130 feet at waterline
Height: 192 feet from top of the mast to the waterline

Operational draft: 36-37 feet
Commissioned: September 1968
Refit: 1984
Decommissioned: March 2007
Source: U.S. Navy/USS John F. Kennedy Project

Source: Jacksonville. 29 December 2017

More VLCCs to be sold for scrap

Capesize bulkers witnessed an extended lease of life during 2017, as the recovery of the dry bulk market gave little incentive to their owners, to scrap them. The same can’t be said for the tanker counterparts, with what looks to be yet another challenging year in 2018, seemingly setting the scene towards more VLCC scrappings.

In its latest weekly report, GMS, the world’s leading cash buyer of ships said that amid the holiday season, activity in the ship demolition market settled down, as ship owners and brokers took some time off, meaning that the next few weeks are bound to be characterized by slow activity. In any case the quieter weeks are perhaps rather welcomed, given what have been a frantic few weeks of recycling activity, with much of the (recycling) focus falling on the wet and offshore sectors of late.

“Moreover, even though the markets recently witnessed a flurry of early-to-mid 90s built Capesize bulker sales from the Korean market (ones that were coming off government charters and being sold for scrap), it has been remarkably quiet on the dry (and container) recycling fronts this year as freight rates in both these sectors have made decent recoveries. The general feeling is that the pain being felt in the wet and offshore sectors is set to last a little longer and even going into 2018, an expectedly large volume of VLCCs (those on storage and otherwise) seem destined to come under the torch. In fact, this year alone, the markets have seen 14 VLCCs and about 25 Aframax tankers committed for scrap so far, most of which have ended up in Bangladesh”, said GMS.

It added that “on the industry front, given the large number of tankers sold for recycling this year and a slowdown on the dry side as well, it has been an exceptionally challenging (and frustrating) period for Gadani recyclers who have found themselves regularly paying over the odds (often as the highest placed sub-continent market), just to secure any of the working (dry) units that have made it for sale thus far. In fact, for the past 3-4 months, there have been whispers that the Pakistani market will open up for tankers again, albeit with stricter gas free for hot works standards (similar to those India and Bangladesh). However, discussions / meetings with the Pakistani government and PSBA are still ongoing as to how soon local authorities will permit tankers into the local market once again, after the tragic accident which cost scores of lives earlier in the year”, GMS concluded.

In a separate note, Athenian Shipbrokers added that “with the holiday season in full swing, last week saw the demolition market quieten down in terms of activity. The Bangladeshi market remained stagnated with no considerable alterations in terms of pricing and fundamentals. In India however local buyers appeared to take advantage of the betterment of local steel plate value and currency leading to a few high-profile reported sales. In Pakistan the hard times continued as the deterioration of local currency pressed the market even more. In the Far-East, the year is expected to close with a negative sentiment, as the majority of yards remain closed”, the shipbroker concluded.

Source: hellenic shipping news. 28 December 2017

The Royal Navy’s ‘most efficient’ ship could be axed

HMS Buwark was presented with the prestigious Royal Navy Capital Ship Efficiency Award four years in a row


A Plymouth-based warship facing the axe was ranked the Royal Navy’s most efficient vessel – four years in a row.

Defence chiefs are considering removing the two Devonport-based amphibious assault shops, HMS Bulwark and HMS Albion, from service in a bid to cut costs.

Migrants disembark in the port of Taranto, southern Italy, after being rescued at sea by British ship HMS Bulwark

It’s reported that scrapping to the two ships would free up sailors to man the new Queen Elizabeth aircraft carriers, which are based in Portsmouth.

In 2016, Bulwark was presented with the prestigious Royal Navy Capital Ship Efficiency Award for the fourth year running.

The Royal Navy says Surface Flotilla Effectiveness Trophies are awarded annually to ships or other units in recognition of “achievement of excellence”.

The award is presented annually to the Capital Ship that has made a "consistent and outstanding contribution in the execution of her tasking and shown the highest standards of effectiveness in the course of her duties throughout the year".

The Royal Navy rescued more than 1,000 people off the coast of Libya, making it HMS Bulwark's "largest operation to date"
The Royal Navy rescued more than 1,000 people off the coast of Libya, making it HMS Bulwark's "largest operation to date" (Image: Rowan Griffiths/Daily Mirror/PA Wire)

Upon receiving the award last year, Captain James Parkin, the captain of HMS Bulwark said: "The Fleet Effectiveness Trophies are the only way for the Royal Navy to announce formally which ships have been assessed as the very best in the fleet.

"For HMS Bulwark to win this coveted annual prize is testament to the hard work and dedication of the hundreds of sailors and marines who have served in this amazing ship over the past 12 months, protecting our nation's interests in home waters, and across the globe.

"I am utterly proud of, and profoundly humbled by, this fine body of men and women - and supremely grateful for the support of their families too."

In 2015, HMS Bulwark and her crew helped rescue hundreds of migrants from the Medeterranean.

And 2016 was another busy year for HMS Bulwark as she took part in Joint Warrior and was involved in the Royal Navy’s Joint Expeditionary Force (Maritime) (JEF(M)) Task Group in the Middle East and Mediterranean.

Remaining ready for any contingency, the JEF(M) task group took part in amphibious exercises off Albania and Egypt before heading through the Suez Canal and conducting further exercises in Oman.

HMS Bulwark then spent a short period training the Somaliland Coastguard, before returning home in December (in time for Christmas) via Haifa in Israel, where she hosted senior dignitaries from the Israeli government and Armed Forces.

In the course of the deployment, the crew ate their way through 20 tonnes of potatoes and 3 tonnes of baked beans, and drunk tea from 23,000 tea bags.

HMS Bulwark has now steamed nearly a quarter of a million nautical miles since entering service in 2004.

Source: Plymouth Herald. 25 December 2017

GMS Market Commentary on Shipbreaking in Week 01 - RISKY BUSINESS!

The opening week of 2018 brought with it, a healthy collection of fireworks and some truly extraordinary and downright baffling sales, as Cash Buyer speculation ramps even further into overdrive and another potentially bullish quarter lies ahead in wait.

As dry bulk freight rates remain firm, the ongoing shortage of bulkers is expected to starve an overheated Pakistani market for tonnage. Consequently, one speculative Cash Buyer tabled an extraordinary price of USD 495/LT LDT for a Capesize bulker this week, in anticipation of a further firming of prices from Gadani.

This is undoubtedly an extremely risky tactic to employ as the fixing price is about USD 50/LDT away from where Gadani levels currently stand for dry units. When markets are positive, speculative offerings in excess of USD 10 - 20/LDT are commonplace. However, this price is definitely not reflective of current rates and could eventually come back to haunt the relevant Ship Owner and / or Cash Buyer, closer to physical delivery of the vessel.

Although local steel plate prices have enjoyed decent gains over the Christmas and New Year period, how long this trend will last remains to be seen. After all, what goes up eventually comes down! Meanwhile, the attention of several Ship Owners has already perked as prices are now on the verge of breaching the USD 500/LDT mark - the first time anything close to this level has been seen since early 2015. As such, it could be that the number of viable candidates increases during the early part of 2018 (especially those nearing SS / DDs) in an attempt to capture some of these fantastic numbers on show.

With Pakistan still closed for tankers, we would urge Owners of wet tonnage to curtail their expectations on rates as the only option for their units remains India or a far more muted Bangladesh, especially for large LDT wet units (Suezmax tankers and VLCCs). Overall, the year has started on a positive note and the prevailing optimism is expected to last at least until the Chinese New Year.

Source: steel guru. 09 Jan 2018